Falling Oil Prices Could Lead to Massive Junk Bond Defaults

By

Maureen Farrell

Dec 1, 2014 11:49 am ET

Junk bonds have financed the U.S. shale boom, and now the sharp drop in oil prices could lead to a massive wave of defaults on that high-yield debt.

Should oil prices fall below $65 per barrel and stay there for the next three years, Tarek Hamid, a high-yield energy analyst at J.P. Morgan Chase & Co., estimates that up to 40% of all energy junk bonds could default over the next several years.

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